I had an interesting conversation with a client the other day. This lady's question was that she was interested in doing a short sale instead of a foreclosure but wasn't sure the point since she and her husband had already gone through a Chapter 7 (liquidation) bankruptcy.
One side of this discussion states - why bother? In going through a bankruptcy an individual is bringing about many of the things that we work with our clients to avoid via a short sale instead of a foreclosure. For example, a bankruptcy will have a very negative effect on your credit (although, in many cases the actual bankruptcy will have little effect since the credit has been thoroughly decimated leading up to the bankruptcy) and leads to a negative public record that could be searched by potential landlords, or even potential employers. With a bankruptcy already on the record is it really worth it to go through the hassle of a short sale?
Another school of thought is that a short sale will always be better than a foreclosure and one negative public record is better than two negative public records. Is it worth the time and effort to have, what is most likely, a marginally better credit score and public record? That all depends on the homeowner in question.
Personally, I think in many cases it would be worth the effort. For one, It is likely that the effort from the homeowners won't be too intense since many of the documents needed to be gathered for the bankruptcy are the same documents needed for a short sale. Banks also tend to approve short sales quickly when they are filed by a homeowner just out of bankruptcy. Additionally, there is the HAFA program which, if the homeowner qualifies, enables the homeowner to receive up to $3,000 in compensation upon successful completion (many investors can usually guarantee that figure - even if the government approval were to not be granted for whatever reason - including our firm).
The idea of improving ones credit (even if it is marginal), while making $3,000 for a little bit of work that is already most likely completed doesn't seem too bad. Obviously, however, individual circumstances will most definitely apply. I highly recommend discussing the implications with a qualified bankruptcy attorney.
Monday, February 21, 2011
Tuesday, February 15, 2011
Initial Consultation
I had a question the other day regarding what we go over in our consultation with our clients.
Typically, our clients are facing financial hardship of one form or another and are usually not making payments on their house, or in some cases are contemplating not making further payments on their house. They typically, are leery of foreclosure which is why they contacted us in the first place but do not know all of the options out there and don't typically know what path they want to take. In this situation our role is to help the homeowner find the solution that best suits their needs.
It is our job in this meeting to not tell the homeowner what they should do but to listen to what they want to do. We spend the first part of the meeting listening to the homeowners situation. Next we ask the homeowner what their desired outcome is. From this conversation we can usually get a pretty good idea what the best solution for this homeowner is. For example, if they are dead set in staying in their home then I'm certainly not going to recommend a short sale! Or, if the homeowner simply has no way of affording the payment - even if the loan were to be modified, then we'd of course, recommend against wasting time on a loan modification or attempting to talk to the bank about a forebearance. However, it's important that we NEVER want to force the homeowner to do anything they don't feel good about because at the end of the day the homeowner has to be committed to the plan of action and I don't want to force anyone to do something that they might regret. Not only does that usually lead to an unhappy customer but it also is likely to lead to an unsuccessful conclusion since so much of the work has to be done by the homeowner - I can and do help but I can't do everything!
After the homeowner has opened up about their situation there is usually a frank discussion about what the different options are. For most folks the options are died in lieu of foreclosure, loan forebearance, loan modification, short sale or, as unappealing as it sound, wait until kicked out by the bank through the foreclosure process. Each does have its upsides, but of course, they also have their downsides. I view my job as being able to clearly explain each of those options and to give an informed opinion on the risks involved with choosing a particular option - including the chance that we might be unsuccessful, as well as what a successfull pursuit of that particular option would look like - and what will be needed from all parties to make it happen.
It certainly is an important decision and I feel very privileged to be called upon to help these folks in their time of need. If you or anyone you know is going through this situation please contact me at patrick.bowes@mcahomes.com or go to mcahomes.com and I'd be happy to go through your options in detail and help you work out a win-win situation; free of charge.
Typically, our clients are facing financial hardship of one form or another and are usually not making payments on their house, or in some cases are contemplating not making further payments on their house. They typically, are leery of foreclosure which is why they contacted us in the first place but do not know all of the options out there and don't typically know what path they want to take. In this situation our role is to help the homeowner find the solution that best suits their needs.
It is our job in this meeting to not tell the homeowner what they should do but to listen to what they want to do. We spend the first part of the meeting listening to the homeowners situation. Next we ask the homeowner what their desired outcome is. From this conversation we can usually get a pretty good idea what the best solution for this homeowner is. For example, if they are dead set in staying in their home then I'm certainly not going to recommend a short sale! Or, if the homeowner simply has no way of affording the payment - even if the loan were to be modified, then we'd of course, recommend against wasting time on a loan modification or attempting to talk to the bank about a forebearance. However, it's important that we NEVER want to force the homeowner to do anything they don't feel good about because at the end of the day the homeowner has to be committed to the plan of action and I don't want to force anyone to do something that they might regret. Not only does that usually lead to an unhappy customer but it also is likely to lead to an unsuccessful conclusion since so much of the work has to be done by the homeowner - I can and do help but I can't do everything!
After the homeowner has opened up about their situation there is usually a frank discussion about what the different options are. For most folks the options are died in lieu of foreclosure, loan forebearance, loan modification, short sale or, as unappealing as it sound, wait until kicked out by the bank through the foreclosure process. Each does have its upsides, but of course, they also have their downsides. I view my job as being able to clearly explain each of those options and to give an informed opinion on the risks involved with choosing a particular option - including the chance that we might be unsuccessful, as well as what a successfull pursuit of that particular option would look like - and what will be needed from all parties to make it happen.
It certainly is an important decision and I feel very privileged to be called upon to help these folks in their time of need. If you or anyone you know is going through this situation please contact me at patrick.bowes@mcahomes.com or go to mcahomes.com and I'd be happy to go through your options in detail and help you work out a win-win situation; free of charge.
Wednesday, February 2, 2011
Loan Modifications
You know, loan modifications should be a legitimate alternative to foreclosure or short sale for homeowners who can't afford their payments, yet want to stay in their house. Alas, the world does not work as it should - especially when the government wants to "help".
I'll skip the stats for now and illustrate a comment that came from a senior manager at a local non-profit, community housing organization. In our discussion she mentioned that the majority of people seeking foreclosure relief help simply didn't qualify. Those that did had to endure painfully long waits that could stretch over a year. Finally, the majority of those that were approved just ended up defaulting on their payments again - sometimes within months and dropped out of the system.
The sad thing is that the majority of these folks will go into foreclosure. These homeowners tried hard to do what the banks and the government wanted them to do but were let down. "Wouldn't it be great" ideas dreamed up in Washington don't work (and waste LOTS of money) when they try and tell the market what to do, or how the market should work.
Best advice if you are in a situation where you are facing a potential foreclosure is to look into all of your options. Please don't assume that one magic program will be the cure to all that ails. Especially when it comes from Washington...
Check out this article for a little further color
I'll skip the stats for now and illustrate a comment that came from a senior manager at a local non-profit, community housing organization. In our discussion she mentioned that the majority of people seeking foreclosure relief help simply didn't qualify. Those that did had to endure painfully long waits that could stretch over a year. Finally, the majority of those that were approved just ended up defaulting on their payments again - sometimes within months and dropped out of the system.
The sad thing is that the majority of these folks will go into foreclosure. These homeowners tried hard to do what the banks and the government wanted them to do but were let down. "Wouldn't it be great" ideas dreamed up in Washington don't work (and waste LOTS of money) when they try and tell the market what to do, or how the market should work.
Best advice if you are in a situation where you are facing a potential foreclosure is to look into all of your options. Please don't assume that one magic program will be the cure to all that ails. Especially when it comes from Washington...
Check out this article for a little further color
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